Outsourcing competition closes on India

India remains favourite for outsourcing, but has serious competition because of incentives offered by governments in different countries, according to analyst IDC.

Changing economics are shaking up the outsourcing market in the Asia Pacific region, said IDC.

"As the focus shifts away from costs, the differentiation between cities is being reduced while competition for lucrative offshore spending in increasing," IDC said.

Formerly low-cost destinations are becoming less desirable, and higher-cost skills-based opportunities are becoming more popular, said the analyst.

Results from IDC's latest Global Delivery Index - Asia/Pacific (GDI-AP) v2.0 show notable movements over the past six months.

A number of factors linked to changes in economic circumstances - either directly, or by way of changing buyer and investor behaviour - have changed countries' scores in the index.

Government support has changed for a number of locations over the past six months, driving initiatives on federal and local government level. Results indicate the greater a government's support, the better a location is positioned for global delivery.

Labour costs are increasing across the board, as early adopters and previously low-cost locations become less attractive. The Indian rupee has greatly appreciated in value in recent months.

Dalian and Beijing in China, Auckland in New Zealand and Kuala Lumpur in Malaysia "most strongly reflect changing dynamics, particularly in regard to changes in government support and the fallout from rising labour costs", IDC said.

Whilst Bangalore and New Delhi still lead the pack in the region for the best outsourcing locations, these are now level with Mumbai, showed the IDC index.